Social security and retirement

I had most of this post finished the other day (had to do a bit of research) and was going to post it today, but then I had a short conversation with Mr. Neighbor yesterday and thought that goes well with this blog post too.

DH is a little over 4 years from being able to start taking social security at age 62. I've tried to do as much research and reading on this as I can as to when it's best to start taking. Waiting longer isn't always the smartest choice. Plus, there's this thing called the break even point. It's the age dh would have to reach before taking it earlier starts being less money than waiting. For him this break even age is 82.

I also just learned something else today, I wasn't quite clear on how it works. I know he can claim half of my monthly amount, if that is higher than what he would get claiming on his earning record (mine is higher). I knew he had to wait until I was retired to claim half of my benefit. I don't plan to retire to age 67 at the earliest (my full benefit age) and most likely will work past that. I thought it was an either or type of deal. What I just learned is that he can start claiming his benefit at age 62 and then when I retire he can switch to claiming the higher spousal benefit at that point (though it sounds like it will be reduced some for what he's already taken, but still more than he was getting). That makes things better, for sure. I was thinking he would have to stay collecting his smaller amount the whole time.

So, it's looking like between his break even age of 82 and later being able to get half of my monthly amount, it will be ok if we start taking his at 62. That extra amount each month for the 5-8 years before I retire will be extremely helpful, especially in paying down the mortgage balance.

If I retire at age 70, our combined SS (based on today dollars - ha!) would be $60k a year. Plus what I can draw down from my retirement savings each year. I think with a house almost paid for or paid for, we could live on $80k a year fairly comfortably. I'm working on the amortization spreadsheet I have for our mortgage to see what I need to do to get it paid off by age 70.

I read something interesting I hadn't really thought of the other day on the message board dh frequents (they talk about everything) and one guy commented he was glad he's saved and paid his house off these past several years, with what's coming in inflation. Another guy had a different take on it - and since I'm stuck with a mortgage payment, this observation made sense to me. He said he has a mortgage with a low interest rate and inflation isn't going to change his mortgage payment over the next 20+ years, so he's coming out ahead in that aspect. True. If (well it's not if, it's how much) inflation goes up we are paying for this house in pre-inflation dollars. Hopefully my salary will eventually go up some over the next 9 to 12 years of working. But in 9-12 years, with what everything is going to cost, this will seem like a small house payment, all things considered.

Plus, the social security estimated benefits are given in today's dollars, from what I read. So, us getting $60k a year total combined benefits is today's dollars. Social Security has a calculator to estimate what they think your monthly benefit will be in inflated dollars. According to their calculator if I retire at age 70 our inflated combined benefits would be $88,000 a year. Tomorrow's dollars, with a few years left to pay off our mortgage in yesterday's payment amount, won't seem so daunting.

Of course none of us know how long we're going to live, but I think in dh's case and health it's a good bet he's not going to go too many years past his break even age of 82. His mom lived to 85, his dad to 80. While he doesn't smoke or drink, he does have a health issue that I'm sure will shorten his life to some extent. His body will only be able to to take it for so long and the constant pain he experiences will make getting through other medical things even harder as he ages. I'm sure it's wearing his body down faster every year.

The other part I need to look into is how it works if you start drawing, but keep working. From what I am reading it's depending on how much you make and also if you've reached your full retirement age yet. I'm not quite sure I'm understanding that part yet, so more reading is in order. My FRA is 67.

I still have several years to figure this all out and decide which is the best plan, but good to have some kind of knowledge and plan with it only being 4 years out.

I went to get our mail yesterday and Mr. Neighbor had just gotten his and on his way back to his house. We chatted a few minutes. I asked how Mrs was doing. She had knee surgery in January and was due to be out of work at least 6 weeks, but then she is supposed to retire in May. He said she will be going back to work in about two weeks and then retires a couple months after that. He said she's gotten a good idea of what retirement will be like, being off. I said "and she's liking it?!" (thinking he was going to say yes) and he said "Noooo! She hates it. She's bored. She's sitting downstairs right now watching a movie". I said oh, no, that's too bad.

On my walk back to my house I thought to myself, boy, that is kind of sad. I don't want to be 72 years old (she will be almost 72 1/2 when she retires), finally getting to retire and not enjoy it. I wouldn't want to be 72 years old and my whole happiness in life is my job! No thank you! I like my job, but my whole life doesn't revolve around it. There is way more to life and enjoying it each day than going to work, that's for sure. Especially when you don't have a lot of years left ahead of you. Not to mention she has to drive almost 100 miles round trip to work and she doesn't even make a bunch of money (bank teller).